The true investor starts from zero

ETFs are Investment Funds that are traded on the stock exchange. They are bought and sold throughout the day, and their price is constantly updated. They are usually associated with an index, and considered "passive investment", as there is no active manager trying to make the Fund perform as well as possible, there is only an automatic system that ensures that the ETF performs similarly to the index. ETFs are much less charged than Investment Funds.

At ActivoBank, the first stock market order is free every month, across all markets and financial instruments. The cost for the second and subsequent orders is €5.

ETFs are traded on the stock exchange and replicate indices, whereas traditional funds are typically actively managed. ETFs generally have lower management fees and can be bought or sold like stocks, whereas traditional funds involve a less flexible subscription and redemption process.

ETFs are complex financial products and do not guarantee the invested capital, so they are best suited for investors with some market knowledge. However, they are often recommended for beginners due to their diversification, low costs, and ease of access. Before investing, it’s important to consider your objectives, risk tolerance, and time horizon.

Consider factors such as the replicated index, total cost (management fees and commissions), type of ETF (accumulating or distributing income), liquidity, and alignment with your objectives, such as growth, income, or diversification.

It depends on the type of ETF. Accumulating ETFs (Acc) reinvest dividends into the fund, while distributing ETFs pay dividends to investors.

ETFs are subject to several risks:

• Market risk, such as fluctuations in the prices of underlying assets;
• Tracking error, which refers to small discrepancies between the ETF's performance and the replicated index;
• Currency risk, if traded in different currencies;
• Liquidity risk, depending on trading volume.

The risk of ETFs varies depending on the underlying assets. For example, equity ETFs have higher volatility, while bond or commodity ETFs may have more specific risks. It is important to evaluate the product based on your risk profile and investment goals.

Time is a crucial factor in ETF investments, as they are ideal for long-term strategies, benefiting from compound interest and portfolio diversification. In the short term, they can be used for tactical adjustments or to gain exposure to specific markets.